• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

Alltel Profit Up 53 Percent on Stock Sale

Posted on: Thursday, 4 August 2005, 12:00 CDT

LITTLE ROCK - Regional phone company Alltel Corp. said Thursday its second-quarter profit jumped 53 percent as gains from a stock sale and acquisition-related items added to strong wireless revenue growth.

The Little Rock-based company earned $402.1 million, or $1.27 per share, up from $262.5 million, or 85 cents per share, a year earlier. Earnings from continuing businesses - which exclude the gains and debt prepayment costs - grew 8 percent to $284 million, or 90 cents per share, topping the expectations of analysts surveyed by Thomson Financial, who were looking for a profit of 85 cents per share.

Revenue rose 11 percent to $2.26 billion from $2.04 billion, driven by a 16 percent increase in wireless sales to $1.46 billion. Wireline revenue declined 2 percent to $595 million. Analysts were looking for total sales of $2.18 billion.

Chief Executive Scott Ford said Thursday that dealing with wireline losses in the face of expanding wireless and voice-over Internet competition remains the industry's toughest challenge.

"We're looking at a strategy to best position both businesses for growth," Ford said in a conference call with investment analysts. "We expect to spend a considerable amount of time on the subject the rest of the year. But it's not a foregone conclusion that any alternative to the wireline business will be pursued."

On the wireless side, the company expects to face some short-term difficulties integrating new businesses for a longer-term gain. On Monday, Alltel completed a $6.5 billion acquisition of Western Wireless Corp., giving it more than 10 million wireless customers in 34 states.

Chief Financial Officer Jeff Gardner said he expected the Western acquisition would allow Alltel to cut costs in new markets by between $50 million and $60 million this fiscal year, with savings increasing by about $10 million a year through 2008.

As a part of the Western deal, Alltel agreed to divest certain rural markets, and Ford told investors Thursday he expected to complete that process in the mandated four months. But Alltel plans to keep established Western call centers in Manhattan, Kan., and the Seattle area.

Gardner said Alltel will likely face capital expenditures of $1.4 billion-$1.5 billion that should dilute earnings by 15 cents a share for the rest of 2005, but he said: "I still expect to be within the guidance range of $3.30-$3.50" for annual earnings per share.

The company's performance earned praise from analysts during a conference call, including Thomas J. Lee of JPMorgan Chase & Co., who called it an "extremely high-quality quarter." But Thomas O. Seitz of Lehmann Brothers noted Alltel had added fewer prepaid customers than expected.

"Because of the competitiveness of others in the marketplace now, we've decided to wait that out," said Kevin Beebe, Alltel's president of operations. "We've focused more of our advertising on rebranding, which we think is right in the long term."

Alltel acknowledged in May that it had informed the Justice Department and the Securities and Exchange Commission that the company is independently investigating alleged improper payments to former business associates.

The allegations include a former high-level Chinese banker accused of taking a $1 million bribe. Alltel said the alleged payments occurred within its information systems division, which was sold in 2003 to Fidelity National Financial for $1 billion.

Alltel has pledged its cooperation with federal authorities.

The company said the payments drew mention in a December lawsuit involving Fidelity by a consulting firm from China.

Alltel's shares fell $1.36, or 2.1 percent, to $64.27 in morning trading on the New York Stock Exchange.

Source: Associated Press/AP Online

More News in this Category